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The Optimal Mechanism for Selling to Budget-Constrained Consumers

Author

Listed:
  • Che, Y.K.
  • Gale, I.,

Abstract

This paper finds an optimal mechanism for selling an indivisible good to consumers who may be budget-constrained. Unlike the standard case, where buyers are not budget-constrained, a single posted price is not optimal. An optimal mechanism generally consists of a continuum of lotteries indexed by the probability of consumption and the entry fee.
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Suggested Citation

  • Che, Y.K. & Gale, I.,, 1994. "The Optimal Mechanism for Selling to Budget-Constrained Consumers," Working papers 9415, Wisconsin Madison - Social Systems.
    • Handle: RePEc:att:wimass:9415
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    Cited by:

    1. Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
    2. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
    3. Arijit Sen, 1998. "Seller Financing of Consumer Durables," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 435-460, September.
    4. Gautier, Axel & Mitra, Manipushpak, 2002. "Financing Infrastructure under Budget Constraint," Bonn Econ Discussion Papers 15/2002, University of Bonn, Bonn Graduate School of Economics (BGSE).

    More about this item

    Keywords

    marketing ; consumption;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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